Taxation of EE Pay

Question 1

Employed criteria (5)

Answer 1

1 - There is a ‘Contract of service’
2 - There is a high degree of control over a worker
3 - There are set hours, holiday pay, overtime and a high level of supervision
4 - Working for a single employer more likely to be ‘employed’
5 - An individual can be suspended or dismissed

Question 2

Self Employed criteria (5)

Answer 2

1 - Contract for services
2 - Agreed level of payment
3 - Freedom to accept or decline work
4 - Sub contract
5 - Work for different companies

Question 3

Employer Responsibility (4)

Answer 3

1 - Deduct the correct amount of IT and NI
2 - Keep record of pay and deductions
3 - Pay HMRC each month - 22nd electronically
4 - Send year end return of payments and ded’s to HMRC

Question 4

What’s included in P14/P60 and a P11d/P9d

Answer 4

P14/P60 = Each EE - total pay, IT and NI deductions

P11d/P9d = expenses and benefits paid to Directors and employees earning over £8,500 (P11d)

P9d for all other employees

submitted by 6/7

Question 5

Allowable deductions from income - Interest payments (4)

Answer 5

Purchase shares in or make loans to a company - close co or owns 5% or more of the shares

Partnership investment - buy in or lending

Purchase of plant and machinery - own business

Payment of inheritance tax - 1 year only

Question 6

Tax on assets used by EE

Answer 6

20% of the market value at first use plus any expenses incurred by the ER

Question 7

Beneficial Loans - interest rate?

Answer 7

Subject to charge if interest rate below 3% HMRC limit unless less than £10k then no charge

Question 8

Provision Of Living Accommodation

Answer 8

1) Rent actually paid or
2) If owned by ER then excess above £75k x4%
3) Furniture charged at 20%

Question 9

Relocation expenses - what amount is tax free/chargeable?

Answer 9

Up to £8k tax free and excess charged

Question 10

Savings Related Share Scheme SAYE criteria -

Answer 10

This is a savings-related share scheme where employees can buy shares with their savings
 For a pre-determined fixed price.
 The price cannot be less than 80% of the market value
 They can save up to £500 per month under the scheme
 Contributions are made from employees net income
 At the end of the savings contract (3 or 5 years) they can use the savings to buy shares in their employer
 The tax advantages are:
 - the interest and any bonus at the end of the scheme is tax-free
 - they don’t pay Income Tax or National Insurance on the difference between what they pay for the shares and what they are worth
 They might have to pay Capital Gains Tax if they sell the shares - but not if they put them into an ISA or pension as soon as they buy them.

Question 11

Employee Shareholder Status - features

Answer 11

Until 30/11/16 ER’s could give EE tax advantaged share between £2k and £50k in lieu of EE rights - redundancy, flex working hours etc

1) IT and NI not chargeable on first £2k
2) no CGT on first £50k

Question 12

Tax on Computer for private use?

Answer 12

20% of market value